First Solar Stock Pitch | Fall 2016

Bulldog Student Investment Fund

Julian FungParker Neff

Michael Nimmer

Jonathan Rogers

Darren Tjung

Executive Summary

● Industry Leader

● Innovative Technology with Promising Pipeline

● Solid Balance Sheet

● Strong Growth Prospects beyond 2017

BUYCurrent Price:

$28.65Target Price: $33.74

Upside: 17.79%

Solar Industry Overview• Expected growth across various markets, with a

slight decline during 2017• Trump presidency, Republican Congress may

provide challenges to clean energy markets

Solar Industry Overview• Strong fundamentals across solar, approaching

LCOE with traditional industries

Solar Industry Overview

Conclusion: The solar industry has a bright future due to decreasing costs and the industry should thrive in the long-run regardless of the political climate.

Business Breakdown

Growth Drivers

• Utility-scale solar farms

• Technology efficiencies

• Low manufacturing costs

• United States policies

• Specific countries bolstering industry growth

SWOT Strengths Weaknesses

● Industry leader

● Large R&D investments

● Unique thin-film technology

● Unsustainable project pipeline

● Brand portfolio

Opportunities Threats

● Increase in grid parity

● Yearly global solar installations

● Decrease in PV module prices

● Uncertainty regarding subsidies

● Inability to lower costs

● Silicon costs

Porter’s 5

Competitive Rivalry: High

New Entrants: Moderately Low

Buyer Power: High

Supplier Power: Moderately High

Threat of Substitutes: High

Portfolio Correlation

1 Year = -.3260

3 Year = -.0566

Valuation DCF

$30.0130%

P/SalesMultiple$35.3470%

● Discounted Cash Flow (30%):○ FCF to Firm○ FCF to Equity

● Multiples (70%): ○ Price/Sales

Target Price: $33.74

Discounted Cash FlowAssumptions: ● Growth rates

○ Y1 = -25%○ Y2 = -10%○ Y3 = 8%○ Y4 = 5%○ Y5 = 5%

● Terminal growth rate of 2%

DCF (30%): $30.01

Multiples

Assumptions: ● Sales of $2.9 Billion (2016)

● Sales of $2.6 Billion (2017 est.)

● Sales of $2.8 Billion (2019 est.)Multiples (70%): $35.34

Valuation DCF

$30.0130%

P/SalesMultiple$35.3470%

● Discounted Cash Flow (30%):○ FCF to Firm○ FCF to Equity

● Multiples (70%): ○ Price/Sales

Target Price: $33.74

Liquidation ValueCash and securities $2,126AR $569Inventory $450PV systems $487Projects assets $1,407JV investments $450Total liquid assets: $5,489Less debt: $787Net liquid assets: $4,702

Liquid value/share$45.21

Investment Thesis

• Cost leader in industry• Strong growth prospects in domestic

and international markets• Positioned well for industry

consolidation

Investment Risks• Uncertainty in systems to

components business transition • Lower than projected margins• Headwinds in international markets• Uncertainty in subsidies

Conclusion

● Industry Leader

● Innovative Technology with Promising Pipeline

● Solid Balance Sheet

● Strong Growth Prospects beyond 2017

BUYCurrent Price:

$28.65Target Price: $33.74

Upside: 17.79%